ECONOMICS (CBSE/UGC NET)

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ECONOMICS

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
James works at an automobile factory. Every day he goes to work and inspects the machines at the factory to make sure they are running smoothly. At the end of the every week, James is paid by his boss, Bill, for his good work. James takes his paycheck to the bank every Friday and deposits most of it, but keeps a little bit of spending money. He then takes his wife, Julie, out for dinner, using the leftover money from his paycheck. According to the circular flow of economics, which market is James participating in by going out to dinner with his wife, Julie?
A
Product Market
B
Stamp Market
C
Automobile Market
D
Factor Market
Explanation: 

Detailed explanation-1: -The correct option is c. Household spending flows through product markets.

Detailed explanation-2: -For working at the diner, for example, your income would be wages paid in the form of a paycheck at the end of the month. So, in the market for resources, households sell resources and businesses buy resources. The resources flow one way (counter-clockwise) and money flows the other (clockwise).

Detailed explanation-3: -The circular flow model demonstrates how money moves from producers to households and back again in an endless loop. In an economy, money moves from producers to workers as wages and then back from workers to producers as workers spend money on products and services.

Detailed explanation-4: -What is the circular flow diagram? The circular flow diagram is one of the basic concepts of economics. This diagram explains the general movement of money on a day-to-day basis through the relationship that exists between the main economic agents, such as companies, families and the public sector.

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